GST-free sales and purchases of new recreational boats

For GST, Luxury Car Tax and Wine Equalisation Tax purposes, from 1 July 2015, where the term ‘Australia’ is used in this document, it is referring to the ‘indirect tax zone’ as defined in subsection 195-1 of the GST Act.

From 1 July 2011, you can sell or purchase a new recreational boat GST-free if the boat is exported from Australia within a specified 12-month period.

What is a disqualifying activity?

To be GST-free, new recreational boats you sell or purchase cannot be used for any commercial activity or financial gain by either the purchaser or any other person while the boat is in Australia. In addition to this, a new recreational boat cannot be used for any of the following purposes:

as security for the performance of an obligation, other than as security for the loan used to purchase it

in carrying on an enterprise in Australia

in carrying on an enterprise outside Australia, other than for activities done as a private or recreational pursuit or hobby

to obtain any payment, other than

as an employee providing services to an enterprise carried on by the purchaser outside Australia

winnings paid from a race or other sporting event in which the purchaser competes.

the purchaser takes physical possession of the boat

the supplier receives the final instalment if payment is made in instalments under a contract that requires the boat to be exported.

the supplier gives an invoice for the final instalment if payment is made in instalments under a contract that requires the boat to be exported.

What other conditions are there for selling or purchasing a boat GST-free?

For the sale or purchase of a boat to be GST-free, either the supplier or the purchaser must export it from Australia within 12 months from the receipt day, unless we allow an extension.

The receipt day is the earliest day on which one or more of the following events occur:

the purchaser takes physical possession of the boat

the supplier receives the final instalment if payment is made in instalments under a contract that requires the boat to be exported.

the supplier gives an invoice for the final instalment if payment is made in instalments under a contract that requires the boat to be exported.

The purchaser can also only use the boat for recreational/non-commercial purposes while it is in Australia.

To be eligible to use the extended GST-free period:

the supplier must maintain knowledge of both the use and whereabouts of the boat for up to 12 months

the purchaser must make sure the supplier is aware of both the use and whereabouts of the boat for up to 12 months

the purchaser must provide the supplier with

documentary evidence as proof that the boat has been exported

a purchaser declaration as proof of non-commercial use when the boat is exported.

Customs Export Declaration

shipping documents

a statement from the purchaser that the boat was only used for recreational/non-commercial purposes while in Australia.

Documentary evidence of proof of export

If the supplier exports the boat, they will need to keep a copy of the following:

Customs Export Declaration

shipping documents

a statement from the purchaser that the boat was only used for recreational/non-commercial purposes while in Australia.

If the purchaser chooses to either sail the boat out of Australia or arrange for it to be exported on a transport ship, the supplier must be given a copy of:

the final Customs clearance documents, export declaration and shipping documents

any shipping documents

a statement from the purchaser that the boat was only used for recreational/non-commercial purposes while in Australia.

What if the boat cannot be exported before the expiry of the 12-month period?

If neither the supplier nor the purchaser can export the boat before the 12-month period expires, both the supplier and the purchaser can jointly apply to us for an extension. However, they need to provide reasons for why they could not export the boat within 12 months and an expected date of export. Reasons could include:

unseasonal weather (seasonal weather would not be accepted as the purchaser would need to take that into account when planning to export the boat)

unforseen mechanical problems

illness.

What happens if the boat is not exported within 12 months or is used in a disqualifying activity?

The sale of the boat becomes taxable if any of the following apply:

the supplier or the purchaser fail to export the boat within the 12-month period or such further time we allow

the supplier does not have proof that the boat has been exported within that period

the supplier or the purchaser become aware that the boat has been used in a disqualifying activity

the supplier does not have proof (such as the purchaser declaration) that the boat has not been used in a disqualifying activity.

This means the supplier will have to pay GST to us on the sale of the boat, even if GST was not included in the original sale price at the time the boat was sold.

The terms and conditions of the sale may provide the seller with the opportunity to recover this amount from the purchaser.

Our commitment to you

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations.

If you follow our information and it turns out to be incorrect, or it is misleading and you make a mistake as a result, we will take that into account when determining what action, if any, we should take.

Some of the information on this website applies to a specific financial year. This is clearly marked. Make sure you have the information for the right year before making decisions based on that information.

If you feel that our information does not fully cover your circumstances, or you are unsure how it applies to you, contact us or seek professional advice.